Regeneron Pharmaceuticals Inc.'s Q2 Earnings -- It's Still All About Eylea, but Not for Too Much Longer

The biotech heavyweight's earnings rose yet again solely because of strong Eylea sales, but there's potential for new drugs to hit the market soon that could help to carry the growth torch.

By Brian Feroldi – Aug 10, 2016 at 8:04AM EST

Image source: Regeneron Pharmaceuticals.

Biotech giant Regeneron Pharmaceuticals (REGN +1.97%) released its second-quarter earnings on Thursday, August 4th, before trading started for the day. The company's shares wound up falling by around 3.5% in the trading sessions that followed the release. Let's dig into the company's results to figure out what spooked the market, and check in to make sure the company's long-term growth story is still on track.

Regeneron Pharmaceuticals' Q2 -- The raw numbers

	Q2 2016	Q2 2015	Change %
Eylea U.S. sales	$831 million	$655 million	27%
Total revenue	$1.2 billion	$999 million	21%
Non-GAAP net income	$329 million	$265 million	24%
Non-GAAP EPS	$2.82	$2.27	24%

Data source: Regeneron.

Regeneron's top-selling eye disease drug, Eylea, continues to grow like wildfire. Revenue in the U.S. was up 27% year over year, which is slightly above management's full-year growth guidance range of 20% to 25%. Bayer, the company's international sales partner, reported that sales of Eylea grew by an impressive 44% in markets outside the U.S. Regeneron's portion of the international profits came in at $167 million for the period, up 56% from the $107 million that it recorded in the same period last year.

Praluent, the company's cholesterol-busting drug that it launched last year in partnership with Sanofi, continues to muddle along. Sanofi reported that second quarter sales of the drug were only $24 million, which was up sharply on a percentage basis from the $13 million that was recorded in the first quarter, but it's still just a drop in the bucket when compared to Eylea. Praluent is likely to continue to struggle until long-term cardiovascular outcomes data finally becomes available.

Total revenue jumped by 21% for the quarter and landed at $1.21 billion. That was slightly less than the market's expectation of $1.25 billion, which appears to be the primary reason that shares sold-off in the wake of the release. However, despite the lower-than-hoped-for revenue, Regeneron was still able to grow its Non-GAAP EPS by 24% for the quarter, coming in at $2.82. That's an impressive result given that spending to support the company's pipeline and recent product launches continues to grow rapidly. That results also bested the $2.65 that Wall Street had expected.

What management had to say

Leonard Schleifer, Regeneron's CEO, offered up a lot of positive commentary on the progress that the company made during the quarter, stating:

"In the first half of this year, EYLEA continued to demonstrate strong sales growth, and Praluent sales made steady progress as healthcare providers become more familiar with this new therapeutic class and learn to navigate payer utilization management criteria. In the second half of the year, for sarilumab in rheumatoid arthritis, we look forward to the upcoming U.S. regulatory decision and potential launch. We also recently completed a U.S. regulatory submission for dupilumab for the treatment of atopic dermatitis and are working to bring this breakthrough therapy to patients as soon as possible."

Looking ahead

Management made a few tweaks to its spending guidance range for the full year. The company raised its spending guidance for R&G and SG&A, but lowered its estimates for capital expenditures. It also reaffirmed the 20% to 25% U.S. growth rate for Eylea's sales, even though the company beat that number in both the first and second quarters.

Regeneron's future prospects continues to look healthy even if you look beyond the numbers. Sarilumab, the company's potential treatment for rheumatoid arthritis, is currently pending FDA approval with a target decision date of October 30th. The drug was also officially accepted for review by the EU in July. With peak sales estimates running as high as $1 billion, this drug could go a long way toward helping to diversify the company's revenue.

The other drug that investors should watch like a hawk is Dupilumab, Regeneron's potential treatment for atopic dermatitis. The drug has already been submitted for FDA review, which puts it on pace for a go/no go decision in the first half of 2017. Peaks sales for this drugs are running as high as $4 billion, so seeing it advance toward regulatory review is a great sign.

Given that Regeneron continues to offer fast growth via Praluent, sarilumab, and dupilumab, I continue to think that this stock is a great choice for any investor with an above average tolerance for risk.

Brian Feroldi first starting "investing" -- if you can call trading penny stocks investing -- in 2004. Thankfully, he lost a good chunk of his money early on and realized there was far more to the stock markets than just buying and selling junk. Realizing that he needed help, Brian voraciously read every book on money and investing that he could get his hands on. Thankfully, that included "the Motley Fool's Investing Guide" and he has been investing using Foolish principles ever since. Brian's investing strategy has morphed into a simple three-step process: 1) Find the highest quality companies on the public markets 2) Buy those companies 3) Sit back and let compounding work its magic Brian was lucky enough to be hired at a start-up medical device maker right out of college. However, after sticking with the company for more than a decade he realized that he was spending all of his free time on his true passion -- finding great stocks to buy. Brian struck gold in 2015 when he was hired by Motley Fool to cover the healthcare industry for Fool.com. He has been doing that ever since. Brian currently resides in Rhode Island where he is happily married and is working hard to raise three small kids. Brian's hobbies are playing board games (chess & escape rooms are his favorite), watching his kids play sports, meeting up with friends, finding ways to lower his carbon footprint, and cheering on the Patriots.

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Regeneron Pharmaceuticals Inc.'s Q2 Earnings -- It's Still All About Eylea, but Not for Too Much Longer

Regeneron Pharmaceuticals' Q2 -- The raw numbers

What management had to say

Looking ahead

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